Recently a 45 page report written by Heiner Flassbeck and Costas Lapavitsas was issued by Rosa Luxemburg Stiftung, “The systemic crisis of the euro – true causes and effective therapies”1. They later popularised their report in a Guardian article2. The main conclusion of their argument is that the left needs to increase its Euroscepticism.
Ironically, Euroscepticism, and especially Euro-zone scepticism is a position broadly held by section of the left, and perhaps most of the far left. To be against the Euro has become a mark of just how left-wing you are.
We will argue that this orientation is unfortunate in that it is strategically a poor choice for the left and that it is not more left wing, but actually helps to bolster tendencies that are not progressive, including methodological nationalism. The commanding heights are no longer to be found at the level of the historic nation states and a retreat to them is pointless.
Flassbeck and Lapavitas make a similar argument to most of the left-wing observers of the structure of the Eurozone and the European Central Bank (ECB). The report details the history and growth of the Eurozone, the reasons for its formation and the structural deficiencies present.
They draw attention to the big divergences in worker productivity between Germany and the periphery and the resulting tensions that this has caused. They also correctly attribute these productivity differences to access to fixed capital.
They describe the historic reasons that small countries found it advantageous to give up currency controls to join larger blocks: the decrease in volatility and the ability to avoid the dangers of carry trades. These factors helped to provide the impetus for countries to drop autonomy over monetary policy in favour of stability in the first place.
The structure of a currency block however leads to a very different sort of scenario than when a fiat currency is coupled with control over deficit spending. The necessity of raising funds by selling bonds on the market means that divergences in productivity can lead to big structural problems. Flassbeck and Lapavitsas point out these structural problems quite lucidly.
There is very little to argue with in their presentation of the historic evolution of the EU or its present predicaments. The question is primarily about their remedies. After all of the talk about the reasons for integration, and the reasons for structural contradictions, they then recommend a breakup of the Eurozone.
The current situation with the Troika insisting on conditions of austerity – that the entire Eurozone should mimic Germany’s export lead strategy is of course preposterous. Indeed, no solution to the EZ’s problems can be found by continuing this route.
These facts should not however lead us to countenance a breakup of the Eurozone. When evaluating our strategic options we have to carefully look at the questions of several factors: We must look at our potential agency within the current balance of forces, we must look not only at our capacity to win outcomes, but in what position those outcomes will put us, and we must carefully assess how those outcomes situate with respect to the furtherance of the project of bringing investment under popular control and the social control of production.
The Character of the EU
The decisions of the Troika have inflicted a terrible cost on the populations of the periphery, with significant numbers of deaths resulting from multiple sources: from lower health spending, from lost wages, from suicide and from an increase in xenophobic violence. There has been an absolute deterioration of the quality of life of a large number of people. It is no exaggeration to claim that the decisions of the Troika have had mortal consequences.
Because of this passions run high. The neo-liberal intentions of the EU and its historical creation as an institution to facilitate the aims of capital are readily seen as a continuity.
The structure of the EU is not, however, an uncaused cause. It represents the balance of forces of capital relative to the working class. Indeed, the moniker “neo-liberal” recalls that this policy is liberalism redux. The pre-WWII conventions of a liberal state are being reclaimed and the historic compromise with labour of the post WWII era is in an advanced state of deconstruction.
This relationship between the forces of left wing thought and working class capacity and those of capital are playing themselves out in the EU because of the development of globalisation and the internationalisation of capital.
Neither are these conditions of globalisation peculiar conditions to the EU. The situation is much the same everywhere in the capitalist democracies. Countries which are not in the EMU such as Iceland, Japan and indeed Sweden are also undergoing austerity programmes.
While there is some truth to the fact that the EU was constructed as a neo-liberal institution, the nation states of Europe themselves were liberal institutions. It was only through working class militancy and political development that they acquired some social democratic character.
The commanding heights
The general trend of capital has been towards support for greater economic integration throughout the world. As economies integrate they also become more sophisticated and specialised in their production. Globalisation has suited capital but it has also facilitated the variegation in production. Computers, iPads and the like are now the product of thousands of individual commodities from dozens of countries.
Capital is about flows: of currency, of products and of investments. It is impossible to understand the economy of a country in isolation if that country is engaged in trade. To the extent that it is engaged in trade it becomes interdependent on other countries. If it imports much of its food, it is literally a week from total disaster if imports come to a halt. If it is dependent on other primary goods, it might last longer, but the population is likely to push for measures of stabilisation if the system come under stress.
We can take Venezuela as a constructive example. Venezuela has imports as percentage of GDP of around 20% and is relatively more autonomous than Greece, which imports over 30% of GDP3. However, it’s critical to recognise that over one-third of food imports for Venezuela come from the United States. This means that Venezuela has very serious absolute limitations on how far they can extend their antagonistic approach to the United States. These limitations are even more extreme for Greece.
It is the flows of goods (both consumer and, especially in the case of Greece, industrial) that give capital power over a country. The monetary policy does have implications for trade, but these should not be overstated. While Greece can devalue its currency by separating from the EMU, this will not change the fact of lower per-unit productivity in Greece in the short term. While it may be possible to sell Greek products at a lower price (in a hard foreign currency) given a devalued Drachma, all imports will have a higher price leading to continuing hardship for Greeks who rely on foreign products.
The ability to seize control of capital is relative to the internal productive autonomy that any region can actually realise. The more endogenous production in a given region the more likely it is to weather the effects of capital attempting to withdraw itself. Indeed capital’s very ability to withdraw becomes more limited and might include actually shipping capital goods out of the country.
The European economies are quite integrated at the present time. The EU154 have imports of less than 10% of GDP as a whole (compare this with nearly 90% imports as percent of GDP for Ireland, and over 30% for Greece). The EU as an entity is far more self-sufficient and closed than its constituent parts. This in turn presents far greater possibilities for having a fight with capital where capital can not escape.
The commanding heights of the economy can no longer be found in the finance sector and industry of the individual nation states. If we are serious about transitioning to socialism we have to be seriously considering the scale at which it will be necessary to have our fight with capital.
The questions of national sovereignty and autonomy can only be understood with in the framework of the real economic relationships that have developed. Such complex economic integration is not easily disentangled and it would be a mistake to imagine that EU countries could easily roll-back integration without suffering significant negative economic consequences. It should be clear that political autonomy or sovereignty outside of the EU simply do not have a material foundation.
Fighting the Behemoth
It is true that the development of the European Union has been a project supported by capitalists and, concordant with that fact, has a strong technocratic orientation. However, this is not the entirety of the story. Some institutions of the EU are at least partially democratic – indeed the Europarliament is more powerful than the Reichstag to which the SPD was elected in Germany in prior to WWI. That there are elections held to positions in the European Union makes it a potential site of struggle, not just for political power but for legitimacy.
It is also true that these elected positions do not provide direct control over much of the European Unions technical apparatus, including the European Central Bank. Nevertheless, the fact is that such issues are now beyond the scope of individual member states to control, and since the levers are EU-wide, we must get there to be able to pull them.
The European Union is built as an extremely streamlined combination of executive and legislative power. The “meat” of the Union, the Commission, has both the power to implement and monitor EU policies, as well as the preponderance in legislative initiative5 although the European Parliament, the Council, a quarter of member states and even citizens, through the European Citizens initiative have certain (limited) roles to play in drafting legislation. Hence, the vast majority of the EU’s power is concentrated in the body least accessible to democratic control, since the commissioners are appointed by member states for the relatively long term of five years.
The role of the European Parliament, unlike within the member states, is not primarily that of a legislature. It is true that the EP has a role in drafting, amending, passing or rejecting EU instruments, but the Commission has, even after the Lisbon Treaty, the upper hand in this matter. What the EP can do is monitor and bring into account the other institutions of the Union. While a capture of the European Parliament wouldn’t, by itself, afford us the kind of meaningful control we would obtain in a typical member state’s parliament, it would considerably increase our capability to block, delay and question policies, and to a certain extent to shape them, as the Union can’t be seen to be paralysed.
The possibilities inherent in the European Citizens’ Initiative remain to be tested. While it is hardly more than a suggestion to the Commission, it is a suggestion with a large number of EU voters behind it, which could result in opportunities to debate and bring forward policies. EU bureaucracies may look completely impervious to public opinion, but they do listen on occasion6. Whether ECIs are to become a useful tool depends largely on the way that they are used and capitalised on in order to start public debates and shape media narratives.
Beyond this it is quite easy to overstate the importance of legality. Legality can be changed given sufficient power. The ECB, for instance, has managed to make several Overt Monetary Transfers (OMT) in direct contravention to the Maastricht treaty. The reason they were able to do this is simply because it suited them at the time and they had the power and legitimacy necessary. Legal realities exist as a residue of social forces.
Our medium term task is to present a legitimacy for an alternative project in the European Union. Currently the European Peoples Party, the European Conservatives and Reformists and the Alliance of Liberals and Democrats for Europe combined have over 50% of the seats in the European Parliament. By contrast the United European Left and Nordic Greens comprise less than 5%. This demonstrates that the majority of the population of Europe is currently voting for candidates that support the policies which are being enacted.
Reform of the current EU institutions would require significant popular support, Socialism even more so. If in fact we do build up a left in Europe that is capable of demonstrating the widely held legitimacy of our ideas, then our capacity to deal with the legal issues will be greatly simplified though still treacherous.
Consequences of Success
We therefore tend to believe that a cooperative solution will be very difficult to achieve. It is either joint political pressure of the southern European countries, including France, that will move the German position, or the crumbling of the walls in one country after another and/or a looming panic in many countries at the same time. Provided they recognise their individual weakness and their collective power, a coalition of the debt or countries threatening the end of EMU may be the best way to force Germany to change its economic model. Should EMU come to an end, the new (old) currencies of these countries would devalue significantly against the old euro and whatever would be the new German currency, destroying a huge part of the German export markets over night. – Lapavitsas & Flassbeck
Flassbeck and Lapavitsas’ Euroscepticism comes from a combination of two factors. A very realistic assessment of our present weakness and a resignation to that state of affairs.
However, as we have argued, the end outcome of a European disintegration leaves us stranded. The capacity for a cooperative solution is the only serious solution to the problem of austerity. We are better suffering austerity together with the potential for a European strategic intervention than apart.
Why should the Southern European countries threaten only an EMU disintegration? This cedes far too much to the Eurosceptic right in the vein hopes of finding allies (in the Guardian article Flassbeck and Lapavitsas suggest that UKIP is gaining at the Left’s expense).
If the political capacity to leave the EMU exists in a coalition of Periphery countries, then so does the capacity to do a controlled debt write-off with or without the consent of Germany. In they end a haircut on debts would diminish the necessity of austerity more directly then a retreat from the EMU and it would impact the capitalists directly rather than attempting to do so indirectly via an inflationary monetary policy. It would leave open the possibility for the Europe Union and the EMU to remain as an institution. Groups such as The Committee for a Workers’ International (CWI, with which the Socialist Party in Ireland is affiliated) have claimed that such a debt write-off would see countries forced from the EMU. Such fatalism is pointless, but it’s not even clear if this is legally possible. It certainly would not be easy and would be potentially economically catastrophic to the EU itself. If it was done in an antagonistic way it could lead to serious catastrophe for the core banking institutions of German France and the UK.
The threats of dissolution of the EU are often not taken seriously enough by the Europsceptic left. The original reasons for coming into the EMU were to avoid speculative attacks – it is highly likely that such attacks would be out in full force immediately following dissolution. We are currently in the largest world depression since the great depression and we are currently seeing a rise of right wing nationalism and even fascist elements, a tremendously dangerous context in which to make such a leap. And what would such a leap gain? A retreat to nation states and the consequent economic disorganisation that will result will produce powerful tensions to support the national bourgeoisie. Antagonistic relationships between nations could flare and it is far from likely that the left will be the major influence. Xenophobia as a result of disintegration is highly probable.
If we are really going to deal with the problems of capital, we will want to deal with both national and international capital collectively and cooperatively. The potential to bring industries under social control, to use the state to finance cooperatives and trusts that help to build up a cooperative sector the ability to regulate working conditions in a way that doesn’t simply give way to competition from neighbouring countries all require an institution on the scale of the EU. The possibility of passing regulations for a move to a 4 day week for instance are within the realm of possibility at the scale of Europe. Such a change could reduce unemployment, precarious labour and improve the bargaining hand of workers. Such changes would likely be objectively impossible at the level of the nation state.
It is clearly difficult to take a straightforwardly Europositive position to the EU as it is currently arranged. The same truths can be told of each of our individual nation states whose bourgeoisie and political leadership seem only too happy to oblige the current neo-liberal austerity programme. And yet, the left does not generally find itself in such paralysis when faced with this truth at the level of the nation state, deeming that it is a site of struggle. There are excellent reasons to be involved with local politics from the municipal up to the state level, but the same is true at the European level. The notion that the European institutions should be the focus of the European left is not to be considered a right-wing policy – it is the only approach that gives us the potential to conquer capital.
- http://rosalux.de/fileadmin/rls_uploads/pdfs/Studien/Studien_The_systemic_crisis_web.pdf ▲
- http://www.theguardian.com/commentisfree/2013/jul/16/germany-left-doubt-single-currency ▲
- http://stats.oecd.org ▲
- http://trade.ec.europa.eu/doclib/docs/2010/november/tradoc_146940.pdf ▲
- http://europa.eu/legislation_summaries/glossary/initiative_right_en.htm ▲
- http://www.bbc.co.uk/news/world-europe-22644280 ▲